“I relate to the IT side of this," Neri told Yahoo Finance Live (video above) on the sidelines of the World Economic Forum (WEF) in Davos, Switzerland, on Monday when asked about any indicators of a potential recession. "And I have to say demand continues to be strong around connectivity, around the AI, machine learning, about the fact that customers want to consume as a service. Our strategy is very well aligned for that."
Neri added that customers — at least right now — are inclined to continue investing in major tech transformations as they position their businesses for post-pandemic life.
“IT is a little bit countercyclical to what we're seeing today or maybe see in the short term — where there’s a lot of pent-up demand to modernize your IT environment, to become hybrid and multi-cloud in everything you do, and the fact that data continues to explode,” Neri said. "So when I talk to customers, which I do more than 50% of my time, they’re really homing in to these digital transformations. ... That’s why I’m optimistic about that — demand is strong in the market, and I think it’s going to be strong in the foreseeable future.”
Recession concerns fuel stock sell-off
While execs have collectively acknowledged that inflation is higher than they would like, it's unlikely that they will include a recession in their financial outlooks as long as top-line sales remain strong.
Nevertheless, recession concerns are in the air as business leaders gather once again in Davos.
With the S&P 500 down about 19% from its Jan. 3 peak, the market is effectively pricing in a 60% to 75% chance of a recession, according to new analysis from Truist co-chief investment officer Keith Lerner.
The sell-off in markets has been widespread, too.
The Nasdaq Composite has fallen deeper into a bear market, with the tech-heavy index down 30% from its record high on Nov. 19, 2021 — led by declines in household names like Netflix and Amazon. While the Dow Jones Industrial Average hasn't joined its friends in bear market territory, the index is still in a correction, or down 10% from its highs.
HPE shares have also been swept up into the tech downdraft despite reporting impressive 20% order growth back in March and lifting full-year profit guidance. Shares are down 16% in the past three months, bringing the stock price below book value, per Yahoo Finance Plus data.
Neri believes the stock price doesn't reflect his company's lucrative pivot to selling products as a service.
“When the Street looks at our stock, obviously it’s been discounted by some of the parts — but by any metric you use, whether its multiple of Ebitda or multiple of free cash flow, we are discounted,” he said, adding: “I believe as we deliver on our commitments we gave to the street last year in October, this is going to turn around.”